Coalition would act on Japan, South Korea trade obstacle

The Coalition would consider removing a major obstacle to Australia finalising trade deals with South Korea and Japan, in a bid to resolve an impasse that exporters argue is costing them dearly.

The Labor government has resisted the inclusion in trade deals of so-called investor state dispute settlement (ISDS) provisions, which would allow foreign companies to claim compensation for policy or legal decisions that hurt their investments.

But opposition foreign affairs and trade spokeswoman
Julie Bishop
said a Coalition government would be prepared to consider including these provisions in a range of bilateral and multi-lateral trade talks.

“I’m informed by South Korean representatives that the failure to include in the negotiations an investor state dispute settlement provision is the reason an agreement cannot be concluded. This is gross negligence or incompetence on the part of [Trade Minister]
Craig Emerson
," she told The Australian Financial Review.

“By not even including it in the first round, we have no bargaining position on the issue. The beef exporters are furious the government has backed itself into a corner and proven to be so inept at negotiating a deal with South Korea when the United States has achieved one," Ms Bishop said.

“The Coalition would, as a matter of course, put ISDS clauses on the negotiating table and then negotiate ISDS provisions on a case-by-case basis."

Dr Emerson has previously argued that agreeing to a system that would allow foreign companies to challenge domestic policy decisions that adversely affect them would involve an unacceptable infringement of Australian sovereignty.

The Labor Party believes that attempts by big tobacco companies to challenge the government’s decision on plain packaging for cigarettes show ISDS provisions in trade agreements could open Australia to the risk of having important policy decisions overturned by an outside panel.

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But Ms Bishop said this argument was “unacceptable" and that a willingness to discuss inclusion of ISDS provisions could prove a breakthrough in deadlocked trade talks. “The government is putting its political fortunes ahead of the interests of exporters and their employees," she said.

National Farmers Federation president
Jock Laurie
said the ISDS provisions had emerged as a “major stumbling block" in the bid to finalise a free-trade agreement with South Korea, which is vital for farmers, particularly beef exporters.

“The two governments have taken completely opposite positions," he said. “We have been trying to get the [Australian] government to reconsider its position."

Liberal MP Dan Tehan, a former diplomat, said there were signs Japan – Australia’s second-largest export market – was keen to pursue free-trade talks and Australia should take advantage of this by offering to negotiate on ISDS provisions.

“Japan wants this dispute settlement mechanism included in an agreement and if it is prepared to give ground on agriculture I cannot understand why Australia will not move," Mr Tehan said.

Mr Tehan said Prime Minister Shinzo Abe’s strong approval rating meant the domestic political climate in Japan would never be more favourable to finalising free trade deals, especially regarding agriculture, which has been a thorny issue in talks between the two countries that started in 2007.

The United States is also keen to include ISDS provisions in the TransPacific Partnership on trade that it hopes to finalise this year.

United States Assistant Secretary of State Jose Fernandez recently urged Australia to focus on the benefits of the TPP deal, rather than on the sticking point over investor disputes. Mr Abe announced in March Japan’s interest in joining the 11 countries in Asia and the Americas already involved in the TPP talks.